How NRIs can use power of attorney for real estate transactions

Many non-resident Indians (NRIs) prefer to invest in the Indian real estate sector to earn passive income and high rental returns. Investing in a property involves careful planning and due diligence and it is a time-consuming process. As NRIs do not reside in India, it becomes challenging for them to manage property-related transactions. A Power of Attorney (POA) is a useful legal instrument that enables NRIs to handle their financial and legal matters through their representatives. In this guide, we will discuss how NRIs can use power of attorney for real estate transactions.

What is a power of attorney (POA)?

A power of attorney (POA) is a legal document given by an individual (grantor or principal), authorising another individual to act on their behalf for handling matters such as property management, investments, medical care, etc. The Powers of Attorney Act of 1882 specifies the various laws relating to the power of attorney.

How is a power of attorney beneficial for an NRI?

Convenience in decision making from anywhere

For some NRIs, travelling to India for carrying out a property purchase or sale many not be possible owing to their work or personal commitments. In such cases, the legal arrangement provided by a POA, enables them to conduct these transactions through a trusted person. However, even if an NRI is able to come back to India to make the purchase, at some point they would have to hire a legal representative, for asset management purposes. The representative can help with negotiations and resolution of issues without the NRI’s physical presence.

Management of property-related matters and facilitation of various transactions

Besides sale and purchase of a property, an NRI can carry out many real estate-related transactions in India, such as renting, leasing, mortgaging, dispute management, etc., while adhering to local laws and regulations. Further, if the property is jointly held, it might be difficult for all the co-owners to be available and complete a transaction. However, through a POA granted to one individual, the joint owners can handle these transactions with ease. The NRI can ensure smooth handling of property matters, including property maintenance, repairs or addressing tenant issues.

Legal formalities

The POA empowers the representative to oversee several legal aspects, documentation and compliance, which could otherwise be challenging to manage from abroad. Moreover, in the event of any property-related emergencies, the authorised representatives can take decisions on behalf of the NRI, mitigating potential risks.

Types of power of attorney (POA)

There are three types of PoA – General Power of Attorney (GPA), Special Power of Attorney (SPA) and Durable Power of Attorney (DPA). NRIs must be aware of the different types of POA and should choose the right one based on their objectives.

General power of attorney (GPA)

Under a GPA, the NRI’s representative is given general rights to make decisions on their behalf. The term ‘general’ implies that the authority or power given by the grantor should be general regarding the subject matter and not specific. However, in case the subject matter has restrictions mentioned, it will be referred to as a limited power of attorney. The GPA can be revoked by the executor as and when they desire.

Special power of attorney (SPA)

This type of power of attorney given by a grantor allows their representative to perform a specific act or business. The act has to be carried out by them in the name of the grantor. Unlike the GPA, the SPA loses its legal validity as soon as the task is performed. Thus, the specific purpose and timelines should be clearly mentioned when drafting the SPA.

Durable power of attorney (DPOA)

This type of POA specifically states that the representative is authorised to perform work assigned by the grantor even if the grantor becomes mentally incapacitated. While a regular PoA ceases to be valid in case of principal’s incapacity, a DPOA continues to be valid.

How to execute a power of attorney in India?

Drafting and execution at the sub-registrar’s office

Depending on the availability, the NRI could get the PoA executed in India or in the country of current residence. They can draft the PoA themselves. However, it is advisable to approach a legal expert who specialises in the sale and purchase of properties involving NRIs. The POA should contain the following details: 

• Personal details: Name, age, overseas address, Indian address and occupation.
• Signature: The principal must sign on each page of the PoA draft.
• Representative’s details: Name, age, address and occupation of the representative.
• Purpose of the POA: The specific purpose for which the PoA is being created should be clearly mentioned.
• Validity period: It should contain the time when the POA comes into force and when it is terminated

Any errors in the draft would render it null and void. To give it a legal validity, the draft will now have to be authenticated by the local authorities. NRIs must get the POA drafted on a non-judicial stamp paper of Rs 100 value and execute the POA by visiting the sub-registrar’s office. This should be done in the presence of two legal representatives and witnesses. They should have a valid ID proofs and photographs.

The sub-registrar’s office will collect the PoA document, photos and fingerprints of each party, along with other papers and the stamp duty for PoA registration. The registered POA could be collected on the due date. This could typically take a week.

Is registration of POA mandatory?

The registration of the power of attorney for NRI for property sale in India is not mandatory, according to the Indian Registration Act, 1908. However, the Supreme Court, in 2011, ruled that registration of PoA is mandatory if it is executed for the sale of a property. The registration should be done at the sub-registrar office falling within the jurisdiction of the attorney’s residence. It has to be noted that a notarised POsA does not have legal validity as a registered POA.

Stamp duty on registration of POA in India

The stamp duty for the registration of POA varies across states in India. One should be aware of the norms governing a Power of Attorney. The stamp fee for a general POA differs significantly based on the attorney’s relationship. In case the attorney is a close relative of the executor, the stamp duty is Rs 500. In case of someone other than a close relative, the stamp duty will be based on the property’s market value or the consideration values, whichever is higher.

PoA execution outside India

In case the NRI resides in another country where they are a resident, the PoA could be legalised though the Indian embassy in that country. This can be done through two ways:

Apostillisation: Under the provisions of the Hague Convention, 1961, the PoA draft must be verified by the local authorities in the country where you are currently living to give it legal authenticity. This process, known as apostillisation, would also ensure nothing prescribed in the draft is in conflict with the local laws. An apostille, also known as superlegalisation, is a legal certificate, which confirms and verifies the signature/seal of the person who authenticated the document. The deed must also comply with Indian laws, such as the Indian Registration Act, 1908 and the Power of Attorney Act, 1882. A stamp duty must also be paid to complete the apostillisation.

Legalisation: In this process, one has to get the deed notarised by a local judge or such authority and then get that judge’s signature authorised by the Indian embassy. This is important, because the notary would get a legal validity only after it is authenticated by an authorised officer of the Indian embassy. This is prescribed under Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. This PoA must be stamped and registered in India within three months of its execution. A stamp duty would be payable, according to Section 2(17) read with Schedule-I of the Indian Stamp Act, 1899, when the deed is presented for registration in India. The deed should be sent by a registered post to an Indian address.

How to revoke power of attorney?

The POA will remain valid only during the lifetime of the grantor and loses validity after their death. The grantor has the right to revoke or cancel the POA at any time. The POA becomes invalid if the grantor is declared insolvent or of unsound mind. The revocation requires a visit to the same sub-registrar’s office, where it was registered and the presence of two witnesses. Before revoking the POA, the executor should notify all the parties concerned and ensure cancellation in accordance with the terms and conditions mentioned in the document.

Housing.com News Viewpoint

There are key considerations that cannot be overlooked if an NRI planning to undertake a real estate transaction in India and execution of a Power of Attorney is one among these. For the execution of a POA, they need not be physically present as the execution and registration can be done through the local Indian embassy in their country. The NRIs and their representatives should be aware of the various regulations governing POA in India. Moreover, any misuse of the POA by the attorney might land them in trouble.

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